UK receives £30bn in orders for green bond despite market turmoil

Despite the turmoil in the financial markets, investors flocked to buy a ‘green’ government bond.

In a sign that demand for UK government debt remains strong, Britain received £30.1 billion in orders for the 30-year bond to fund environmentally friendly projects.

High demand for the £4.5bn bond will have been a welcome relief in Downing Street and the Treasury following the turmoil since last week’s mini-budget for tax cuts.

But the government will have to pay the highest interest rate on any debt it has issued since 2011, after the recent drop in bond prices and soaring yields.

Bond yields around the world have risen sharply over the past year as central banks raise interest rates to deal with rising inflation.

They have surged even higher in the past week amid fears over how Britain will pay for cutting energy prices, as well as £45bn in tax cuts.

Benchmark yields on 30-year UK government bonds rose to 5 percent for the first time since 2002, down less than 1 percent from a year ago, but fell sharply below 4 percent after the Bank of England intervened in the bond market by promising buy old gilts ‘on any scale’ to restore ‘orderly market conditions’.

The green bond sold yesterday will pay interest at 4.29 percent, the highest for all UK debt sold since April 2011.

Before the Bank of England intervention, investors were heading for a return of around 5.1 percent, the highest since 2008.

“Today’s transaction took place against a very volatile market background, so it’s all the more gratifying that it has been well received by the market,” said Robert Stheeman, CEO of the UK Debt Management Office after the sale.